Correlation Between NFI and Transat AT
Can any of the company-specific risk be diversified away by investing in both NFI and Transat AT at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NFI and Transat AT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NFI Group and Transat AT, you can compare the effects of market volatilities on NFI and Transat AT and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NFI with a short position of Transat AT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and Transat AT.
Diversification Opportunities for NFI and Transat AT
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between NFI and Transat is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and NFI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NFI Group are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of NFI i.e., NFI and Transat AT go up and down completely randomly.
Pair Corralation between NFI and Transat AT
Assuming the 90 days trading horizon NFI Group is expected to under-perform the Transat AT. In addition to that, NFI is 1.13 times more volatile than Transat AT. It trades about -0.33 of its total potential returns per unit of risk. Transat AT is currently generating about -0.02 per unit of volatility. If you would invest 182.00 in Transat AT on August 29, 2024 and sell it today you would lose (2.00) from holding Transat AT or give up 1.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NFI Group vs. Transat AT
Performance |
| Timeline |
| NFI Group |
| Transat AT |
NFI and Transat AT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NFI and Transat AT
The main advantage of trading using opposite NFI and Transat AT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NFI position performs unexpectedly, Transat AT can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Transat AT will offset losses from the drop in Transat AT's long position.The idea behind NFI Group and Transat AT pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Transat AT vs. Chorus Aviation | Transat AT vs. Cineplex | Transat AT vs. Lion Electric Corp | Transat AT vs. Air Canada |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |